22 Feb 2010
Harvard Business School Professor Gordon Donaldson Dead at 87
Finance Expert Played Important Roles as Teacher, Researcher, and Administrator
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Gordon Donaldson
1997 Photo: David Zadig

BOSTON — Gordon Donaldson, an expert in corporate financial management who had an enormous influence at Harvard Business School (HBS) as a professor, mentor, researcher, and administrator from 1955 to 1993, died on Feb. 12 in Parkland, Florida, at the age of 87. At the time of his death, he was the School's Willard Prescott Smith Professor of Corporate Finance, Emeritus.

"Gordon Donaldson was a great clinical researcher and a wise mentor to many young faculty members attempting to navigate their way through the promotions process at HBS, a process he led for many years," said Baker Foundation Professor William E. Fruhan, Jr. "He possessed remarkably good judgment and always had a balanced point of view. Over the years, his advice was sought out by successive deans on matters of great importance to the School. He was a pillar of the institution."

Donaldson's pedagogical reach extended across Harvard Business School's MBA, Doctoral, and Executive Education programs. After teaching the required first-year Finance course to MBA students at the beginning of his career, he presided over the popular second-year elective Corporate Financial Management for several years and chaired the HBS Finance Unit from 1965 to 1968.

His involvement in Executive Education included two stints in the School's middle management programs, a year as head of a program for senior managers that then took place in Switzerland, and a six-year assignment in the Owner/President Management Program for entrepreneurs that ended upon his retirement in 1993.

Donaldson was a strong proponent of the importance of finance in the education of managers. "No matter what part of a company they're in," he said in a 1993 interview at the School, "as people move up the corporate ladder, they all have to deal with the impact of their decisions on the balance of funds within an organization."

Donaldson's research agenda produced six books he authored or coauthored, as well as articles in leading publications such as Harvard Business Review, Financial Executive, and The Journal of Financial Economics. "Gordon Donaldson was one of the intellectual leaders of Harvard Business School for many years," said Jay W. Lorsch, the School's Louis Kirstein Professor of Organizational Behavior. "He had a very deep understanding of how significant corporate financial decisions are made, and he was also interested in the values and beliefs of the people making them."

Donaldson's first book, Basic Business Finance (coauthored with colleagues Charles M. Williams and the late Pearson Hunt) was published in 1958, followed three years later by Corporate Debt Capacity. "That work," Donaldson explained in a 1997 HBS profile, "provided a way of thinking that was more systematic than the rules of thumb customarily used up to that point." Strategy for Financial Mobility followed in 1969, focusing executives' attention on the need to develop a plan for dealing with unexpected fund flow deficits.

A decade-long study of twelve mature industrial corporations resulted in two influential books in the 1980s. Decision Making at the Top: The Shaping of Strategic Direction (coauthored with Professor Lorsch) is a close examination of the environment in which the managers of those firms did business -- a complex process, the authors concluded, rather than one that follows simplistic economic models. Managing Corporate Wealth: The Operation of a Comprehensive Financial Goals System presented Donaldson's analysis of how various economic forces, both inside and outside a firm, influence corporate financial strategy.

In 1993, Corporate Restructuring: Managing the Change Process from Within examined thirteen companies that restructured in the 1980s without the threat of a hostile takeover. "Contrary to popular perception," Donaldson observed, "not all restructuring during that decade took place with the barbarians at the gate."

In addition to his many academic achievements, Donaldson made a lasting mark on Harvard Business School through his leadership in a number of important administrative positions. For eleven years he oversaw the hiring and promotion of faculty, first as coordinator of the appointments process and then as Senior Associate Dean for Faculty Development. He also chaired faculty committees charged with revising standards for promotion, examining the School's research policy, and reviewing the ramifications for HBS of the Harvard University-wide abolishment of mandatory retirement in 1994.

This last appointment established a peer review process for all tenured faculty and led the way for the development of the School's Senior Faculty Center for emeriti professors. "We knew we had to prevent a bottleneck in faculty promotions by finding a way to attract people into retirement," Donaldson explained in his 1997 profile. "Then-Dean John McArthur had the foresight to see that the continuing vitality of retired members of the HBS community was tied to the need for a place on campus where they could continue to work and stay connected with the School." Appropriately, when the School's first peer review committee came into being in 1991, Donaldson was named its chairman. The guidance he provided was so highly regarded that he continued to hold that position three years after his own retirement.

Gordon Donaldson was born on July 1, 1922, in Winnipeg, Manitoba. Graduating from the University of Manitoba at the age of 19, he earned a master's degree in economics from the University of Toronto. In the midst of World War II, he joined the Royal Canadian Air Force. He served as an instructor to flight crews from England, Australia, and New Zealand at what was known as the Number One Central Navigational School, located near Winnipeg. At the end of the war, he decided to come to the United States to resume his studies.

Donaldson traced his initial interest in Harvard Business School to a book he read as a graduate student at the University of Chicago, where he earned an MBA in 1948 after three summers of study while teaching at the University of Manitoba during the rest of the year. He planned to pursue a Ph.D. at Chicago, but when he came across HBS professor Myles Mace's volume on small-company governance, Donaldson turned his attention toward Harvard.

"The topic appealed to me, because in Canada I worked in a community dominated by small firms," Donaldson recalled. "As a result, I decided that Harvard would be a better place for me." Since Donaldson believed that "the function of professional scholars in business administration is to apply the test of real-world relevance to everything they do," HBS was the perfect choice - a business school that prides itself on being close to practice.

Donaldson took courses at Harvard Business School in 1950-51 before returning to his native Manitoba to resume teaching and work on his doctoral dissertation. He was invited to join the HBS faculty in 1955, even before completing his doctorate in commercial science in 1956.

Throughout his long and distinguished career at HBS, Donaldson was the epitome of the words "a gentleman and a scholar." Indications of his significance in the history of the School are easy to find. His portrait hangs in a spacious solarium that bears his name in the Senior Faculty Center. The glass doors that lead to it proclaim: "In grateful recognition of the many and distinctive contributions to the Harvard Business School by Gordon Donaldson, our friend, conscience, and a member and leader of this faculty."

In 1995, the Harvard MBA Class of 1963 honored Donaldson by establishing a professorship in his name to support the kind of excellence in management education that his career personified.

When Donaldson received an award from Harvard Business School in 1997 in recognition of his years of distinguished service, the citation read in part: "By leading us in the perpetual pursuit of excellence, you have set our standards for the century ahead."

A longtime resident of Concord, Mass., Donaldson remained active for many years after retiring. Although he and his late wife, Joan (the former Eileen Johanna Steel, who died in 2005 after 56 years of marriage) spent part of the winter in Florida, he could often be found working in an office in the Senior Faculty Center he helped establish. He also enjoyed teaching at reunions organized by graduates of the Owner/President Management Program. In the latter part of his life, after moving from Concord, he maintained homes in Cape Elizabeth, Maine, and Parkland, Florida.

Donaldson is survived by two daughters, Mary Louise Meier of Parkland, Florida, and Patricia Donaldson Smith of Bolton, Mass.; two sons, Richard E. Donaldson of Gorham, Maine, and Robert G. Donaldson of Brunswick, Maine; and six grandchildren. In addition to his wife, a brother, Desmond, also predeceased him.

In lieu of flowers, the family has requested that friends and colleagues consider a donation to organizations that were of special interest to Professor Donaldson, such as the Salvation Army, the Humane Society, or any conservation group. A memorial service celebrating his life may be scheduled in the spring.